Alabama voters approve tapping trust fund for budget fix

BIRMINGHAM, Ala., Sept 19 (Reuters) - Alabama voters approved by two-to-one an amendment to the state constitution allowing a transfer of $437 million from the state's trust fund in order to avoid damaging budget cuts.

In a state-wide referendum on Tuesday, voters signed off on an amendment that authorizes transfers from the $2.3 billion state trust fund over three years that will go primarily to pay for Medicaid healthcare and prisons.

Voters two years ago had rejected another proposal to take $1 billion for roads and other infrastructure from the trust fund, which takes in royalties from oil and gas drillers operating off the state's coast.

Without the amendment, state agencies faced cuts of 10 percent or more that would devastated the prison system, which already spends less per prisoner than most states, according to Brian Corbett, spokesman for the Department of Corrections.

Budget cuts would have also badly stung the state's healthcare providers, which are big employers, according to amendment backers.

In Alabama, more than 1 million people received at least one service from Medicaid, spending on average $3,621 per year, according to the Alabama Policy Institute. With a total impact of $5 billion, a collapse of the Medicaid industry could have sent healthcare providers scrambling to stay in business.

"Half of our revenues are from Medicaid," said Mike Warren, chief executive of Children's of Alabama, a state pediatric hospital.

A coalition of more than 30 groups, from business leaders to educators and prosecutors, supported the amendment through a PAC called Keep Alabama Working. Without the cash injection into the general fund, thousands of jobs could have been lost in the state through drastic cuts, according to Rick Journey, the PAC's spokesman.

Alabama's new general fund budget of $1.7 billion begins Oct. 1, which spurred supporters of the amendment to rush a statewide vote before November's elections.

With the first Republican majority in both houses of the state legislature since the Civil War, policy makers strongly opposed raising taxes to solve budget shortfalls. Republican Governor Robert Bentley had vowed to veto any new tax bills.

"The amendment will give the General Fund time while we continue our focused and resolute efforts to bring government spending under control and restructure government programs for better outcomes and effectiveness," said Senate Majority Leader Jabo Waggoner.

According to the governor, more than $675 million in efficiencies have been found to save money.

The Alabama Trust Fund consists of invested assets from payments on oil and gas leases in the Gulf of Mexico. The fund annually makes deposits from the interest into the general fund. Under the old rules, this year's transfer would have netted $62 million, woefully short of $145.8 million that will now be transferred each year.